defour44

In the example on page 18, the par value of the bonds they purchased was $275k and they paid $300k for them. At the end of the year, they recorded the value of these bonds on the B/S as $297k, which is the "amortized" value of the bonds, since they recorded the bonds initially at $300k, then at the end of each year, they amortize the premium paid on top of par. That makes sense now, but I don't think of that as recording them at cost! Cost would be $300k.

This is the first time, I touch FRA since last year, and I could swear this was a piece of cake for me last year...yet now I'm barely able to figure out just the basic concept....that's not looking good.